Over the past three years, Novavax (NVAX 7.71%) has lost an astonishing 92% of its value on the market. The reason for that is no secret. The biotech quickly established itself in the race to develop a vaccine for COVID-19 in early 2020, only to fall far behind many of its competitors. And now, Novavax is struggling.

But the company recently shared some good news with investors that sent its stock price soaring by more than 20% in just one day (more on that below). Let's find out whether recent developments render Novavax an attractive enough investment option.

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Canada to the rescue

Novavax entered the coronavirus vaccine space much later than some companies, especially Moderna and Pfizer, that ended up dominating the market. That has had real consequences for the biotech. It has lost out on billions of revenue, not to mention the name recognition and prestige that would have come with being the first to crack this challenge.

Further, since Novavax focused on this project for a while, failing to be as successful as it wanted in the COVID-19 vaccine industry has likely compromised its future. Investors got a glimpse of how bad things were a few months ago when the company raised concerns as to its ability to remain in business beyond the ongoing fiscal year, due to the uncertainty surrounding its ability to generate the cash flow it needs.

Novavax needs money to keep its doors open; fortunately, it is about to get some. On July 7, Novavax announced that the Canadian government would pay $349.6 million in compensation for canceled orders of COVID-19 vaccines in connection with a previous advanced purchase agreement. That's what led to Novavax's shares soaring, and it's understandable that it did.

Novavax initially expected revenue between $1.4 billion and $1.6 billion for 2023. The $349.6 million it will receive from the Canadian government represents a little over 23% of the midpoint of its guidance -- that's not insignificant, not by a long shot. Meanwhile, Novavax is also engaged in cost-cutting efforts in a set of initiatives that includes layoffs.

The biotech expects to cut its research and development spending, as well as its selling, general, and administrative expenses, by 40% to 50% in 2024 compared to 2022. The combination of a higher top line and lower expenses is great for any company, including a struggling one such as Novavax. 

Let's focus on the long game

Novavax's recent developments are encouraging, but it's important to contextualize things. Even with its recent major boost on the stock market, the company's market capitalization is only $704 million. Small-cap biotechs are highly volatile and can skyrocket on any positive news. Before jumping on the bandwagon, though, looking at the company's long-term prospects is critical.

And in that department, Novavax barely looks more attractive than it did just a few months ago. Here are two reasons why. First, it will be difficult for the company to carve out a solid niche for itself in the COVID-19 vaccine market. Having taken a back seat to Moderna and Pfizer, Novavax bet its protein-based vaccine would attract those hesitant to get the jab. Many were hesitant because they were skeptical of the new mRNA-based vaccines marketed by Pfizer and Moderna, at least so the argument went.

Novavax's vaccine, developed using more traditional methods, could succeed where those others failed. Unfortunately, that bet hasn't turned out how Novavax anticipated, and the company's vaccine sales have been disappointing. And given the uncertainty of this market moving forward (the pandemic has substantially receded, and it will be challenging to predict vaccine sales from here on out), it's not clear that things can get much better for the biotech on this front.

Second, Novavax has no other product that is anywhere near approval. It is currently working on a combined COVID/influenza vaccine. It is a promising program, but since it is only in a phase 1/2 study, it will be at least a couple of years -- in the very best-case scenario -- before it hits the market. Novavax's combined coronavirus/flu vaccine does little to improve its prospects right now.

Novavax may have recorded a win thanks to the money it will receive from the Canadian government, but its run on the stock market related to that bit of good news could end up being short-lived. Investors with a horizon of five years or more had better ignore this company and turn to other, much more promising biotech stocks